Albert Nicholas, the dean of Milwaukee money managers, has a theory on why the midsize city best known for beer and bratwurst is home to so many top-performing mutual funds. “We are not as influenced by fads and trends as people on the coasts,” says Nicholas, who has run the $1.7 billion Nicholas Fund since 1969. “We are very independent.”
Among the city’s standouts is the $578 million FMI Focus Fund, which beat 99 percent of rivals over the past 15 years. The $10.6 billion Wells Fargo Advantage Growth Fund and the $2.5 billion Heartland Value Plus Fund are among the eight funds managed in or near Wisconsin’s largest city that outgained at least 94 percent of peers over the past 10 years. That’s almost as many as in Chicago, where nine funds pulled off a similar feat—and Chicago is home to five times as many funds.
Many of Milwaukee’s money managers, who collectively oversee about $57 billion in assets spread across 61 mutual funds, offer an explanation similar to Nicholas’s for the city’s success: its isolation. Milwaukee is 733 miles from Wall Street and 89 from Chicago. “I don’t have any neighbors who run hedge funds,” says Andrew Stephens, whose $6.5 billion Artisan Mid Cap Fund beat 99 percent of peers since its start in 1997. “No one is constantly talking stocks to me. I am happy here in my ignorance.”
Much of the city’s money management community can trace its roots to Nicholas. Known as “Ab,” the 81-year-old Nicholas got his start at the University of Wisconsin in Madison, where he studied under Frank Graner, a dapper, chain-smoking professor of finance. At a time when investing was usually taught as a dry academic subject, Graner was an inspiring lecturer who emphasized stockpicking, Nicholas says. Ted Kellner, who started FMI, and Bill Nasgovitz, founder of Heartland Advisors, another Milwaukee fund manager, also studied under Graner. “He was the Pied Piper of investment studies,” Nicholas says.
In 1967, Nicholas started an investment firm with Richard Strong, another Wisconsin graduate. Seven years later, Strong created his own company, Strong Capital Management, whose mutual funds were acquired in 2004 by Wells Fargo. Kellner, who replaced Strong at Nicholas, founded FMI in 1980. In 1994, Carlene Ziegler and her husband, Andrew, left Strong to set up Artisan Partners. The University of Wisconsin link remains strong today: About 60 people who work for Milwaukee firms are graduates of the school’s applied security analysis program, which trains money managers, according to Brian Hellmer, its director.
Students in the master’s degree program get real-world experience by managing $53 million that comes from the university’s endowment and alumni donations, Hellmer says. Thomas Ognar, who runs the Wells Fargo Advantage Growth Fund, and Adam Peck, co-manager of the Heartland Value Plus Fund, are graduates of the program. Both funds beat 99 percent of rivals over the past 10 years.
The city is home to some outstanding bond funds as well. Lyle Fitterer’s $2.7 billion Wells Fargo Advantage Municipal Bond Fund beat 99 percent of rivals over the past 10 years. The $1.5 billion Baird Core Plus Bond Fund, managed by Mary Ellen Stanek, beat 94 percent of rivals over the same period. “We are hardworking Midwesterners here,” says Stanek, president of Baird Funds. “We may not always have the latest sizzle, but that sizzle often doesn’t add value.”